Healthcare in the U.S. is experiencing a full-scale retailization, and most healthcare providers are not set up to thrive in this new landscape. As the industry undergoes rapid transformation, established providers struggle to maintain market share, meet new requirements and, more importantly, ensure high patient satisfaction.
In this blog post, we explore the challenges facing healthcare and provide actionable recommendations on how you can thrive in the consumer-oriented healthcare landscape. This post covers the following topics:
- What factors drive patient empowerment in healthcare
- Why more competitors are entering healthcare, and what it means for established providers
- Why patient satisfaction is critical to success
- How healthcare providers can meet the demands of the empowered patient
Technology and legislation are combining to empower patients in healthcare.
The Affordable Care Act (ACA), which became law in 2010, provides patients with more options when it comes to their healthcare. It is empowering patients by compelling healthcare providers to be more transparent. Hospitals are now required to release a standard list of prices for basic services and procedures. The ACA has also led to a restructuring of the way hospitals and other providers get paid that better serves their communities: increasingly, it’s based upon outcomes rather than volume. The best performing hospitals earn incentives for meeting cost and performance targets, while those that, for instance, have high readmission rates, can face penalties.
"Patients today have the same expectations of health providers as they have of any retailer or any other product or service."
The rise of social, mobile and cloud technologies further fuels the acceleration of healthcare retailization. Patients are going to review sites and asking their friends on social networks to get recommendations on healthcare providers. And thanks to startups like Uber, customer expectation for on-demand, mobile-enabled services is growing—putting pressure on healthcare providers to follow the trend.
The end result is the retailization of healthcare: patients today have the same expectations of health providers as they have of any retailer or any other product or service.
New healthcare competitors are coming from all angles—often from unlikely industries. These new entrants aren’t just stealing away market share; they’re also competing for the overall budget customers allocate for their health.
Drugstore chains such as Walgreens and CVS have introduced walk-in clinics for diagnostic tests, immunizations and other basic procedures. Walmart is also aggressively expanding its health care services in three states.
According to The Economist, private equity firms are pouring money into “urgent-care centres,” stand-alone emergency wards without the additional costs of a full hospital. These commercial and private equity entrants have led some hospitals to open up urgent-care outposts of their own.
To complicate matters, tech upstarts also want a piece of the pie. Consider these examples:
- The online service Honor matches caregivers with seniors who want to stay in their homes, and includes a smartphone app for family members to get updates. One of Business Insider’s top startups of 2015, Honor is helping spur the transition to lower cost, out-of-hospital care.
- Dubbed the “Uber for doctor house calls”,’ Pager is a mobile app that lets professionals summon a doctor or a nurse to visit them at their office. The startup’s early list of customers include tech and media companies like Spotify, Birchbox, Thrillist and Jackthreads.
- For $50, Minneapolis-based RetraceHealth enables patients to consult with a nurse practitioner through video. The startup also offers house calls if the patient requires hands-on care.
As a result of increasing competition, the industry is consolidating. The biggest healthcare organizations are turning to mergers in an attempt to defend their market share. However, some experts believe that the FTC will block these mergers, so consolidation is often not the right answer.
The industry’s transformation means healthcare providers must now pay closer attention to their consumer satisfaction levels.
There is a direct financial incentive to driving patient satisfaction. Under the ACA, every hospital’s Medicare reimbursement is dependent, in part, upon patient survey results.
Medicare now withholds one per cent of all reimbursements, or roughly $850 million every year, and uses the money as a bonus pool for top performing hospitals. Hospitals are graded according to their performance on a number of key benchmarks, including a 27-question survey called the Hospital Consumer Assessment of Health Providers and Services.
Hospitals must also track dozens of other indicators, including mortality rates, hospital readmissions, antibiotic use and more. Only hospitals with strong scores get a share of the money, with the best performers earning more than the rest. And with the $850 million bonus pool set to double in 2017, the stakes will only get higher.
"Healthcare providers must now pay closer attention to their consumer satisfaction levels."
Some observers argue that patient satisfaction surveys are a poor indicator of hospital performance. But what HCAHPS really measures, in the end, is how well health providers communicate with their consumers: telling them about their condition and treatment or explaining key risks and medication side-effects—factors which can actually improve outcomes.
Indeed, the survey is symbolic of just how out of touch health providers have been. Hospitals and other providers, lacking continuous communication and engagement programs, have little sense of what their consumers value most about their care. This disconnect is one of the factors spurring an expansion of new competitors in the industry.
“Competition for the consumer’s healthcare dollar can now emerge from anywhere, from technology start-ups to retail chains,” reads a recent report from The Society for Healthcare Strategy and Market Development. New competitors tend to focus their efforts on the most lucrative aspects of care, undermining the profit centers that hospitals have long relied upon.
The changes have led hospitals to step up their data collection and tracking, measuring everything from surgical-site infection rates to per-patient costs. All told, the healthcare industry is undergoing an accelerated restructuring, with the end patient as its new foundation.
The healthcare sector is innovating rapidly to cater to the needs of this tidal wave of empowered patients—yet in many cases they’re doing it blindly. The industry lags far behind others in its ability to gather data and knowledge about what customers want and what drives their purchasing behavior
Indeed, Americans themselves, unaccustomed to shopping for healthcare services, aren’t always sure what’s most important to them, and their priorities can shift as they learn how to navigate this new, transparent system. In this environment, health organizations with the best insight into why their patients make the choices they do will have a firm advantage on their competitors.
In an age of healthcare retailization, healthcare providers need to better meet empowered patients’ needs in order to remain competitive. Here are three ways they can accomplish that, along with real-world examples.
- Go where the patients are
Oakland-based Kaiser Permanente, seeing the expansion of lower-cost primary-care clinics in retail chains, decided to partner with Target to open a network of clinics in California. There are currently more than 1,900 retail clinics in the country, a number that’s expected to grow to 2,800 by 2017.
- Make patients into partners for new initiatives
When the Cleveland Clinic set out to establish a new wellness program to improve memory, focus and concentration, they sought the help of patients to design the programming. With insight from patients, the Cleveland Clinic had a better understanding of what kind of program people would pay out-of-pocket. The program has enjoyed high enrollment and profitability since the day it launched.
- Speak their language and aim for transparency
In its efforts to comply with the ACA’s new price transparency guidelines, Wisconsin’s Aurora Healthcare went a step further. What’s the point, they wondered, of publishing a list of prices for key procedures if patients can’t make heads or tails of it? By inviting patient feedback on early drafts, Aurora was able to identify potential pitfalls and validate their approach before the price list went public.
The ACA, along with customer empowerment across the board, will only accelerate healthcare retailization. The prognosis for companies that refuse to change isn’t good. Insurers and healthcare providers must get closer to their customers. Healthcare customers, newly empowered by the ACA, are just learning about their options. In the future, they will demand more from healthcare companies.
In the age of customer empowerment, a meaningful relationship with their patients is the last lifeline for companies in the healthcare industry. To remain relevant, companies need to engage with their patients in a two-way dialogue and make decisions that are truly customer-centric. Ongoing patient engagement is the only cure for insurers and providers struggling to adapt to the new landscape of the healthcare industry.
Vice President of Customer Intelligence and Engagement Solutions, Vision Critical
Customer Intelligence Manager, Vision Critical